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FEDERAL
RESERVE
BANK
OF
ATLANTA
VOLUME
....
17,
NUMBER
1,
2007
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Courting the
Creative Class:
New Strategies
for Urban Revival
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
GO Zone Tax
Credits and
The Subprime
Mortgage
Incentives
Market
Case Making:
Building a
Pathway to
Implementation
partners
i n com m unity and ec on omic development
FEATURES
PA G E
6
Courting the Creative Class:
New Strategies for Urban Revival
SomC' c iti es are C'va lu atin g th C'ir unique appea l lo
no ntraditional c! C' mographi c groups in an C' ffort t o
at t rac t ne\\· inn'st ment and rC'Yi\·e distressed
neighborhoods.
PA G E
9
GO Zone Tax Credits and Incentives
Th C' Gulf Opportunit y Zone Tax lncenti\·es and RC'ii C' f
Act makes a\·ailabl C' al most $ 1-I billi on i n federal
tax inc·enti\·es t o C'ncourage businesses t o im·est in
th C' region .
PAGE
1 2
The Subprime Mortgage Market
An excerpt fro m Chairman Ben S. BC' rnanke's remarks
at tlw Federal RC'serve Bank of Ch icago's .J3rd Annual
PA G E
2
ConfNC'n ce on Ba nk Structure and Competi tion.
Innovative Approaches Help
Solve N.0.'s Housing Woes
A New Orleans partners hip has embraced
PAGE
1 6
modular construction in addressing the acute
Case Making: Building a
Pathway to Implementation
need for affordable housing destroyed by
A fo rm er director o f an At lanta nonprofit shar es kC'y
Hm1icanes Kat1ina and Rita. Advances in mod-
princ ipl es in mo\"ing an agenda by bu ilding a good
ular quality a nd design have in creased its
acceptance and made it a viable option in
fin anc ial base , making the case, meeting p eop le
\1·here th ey are , co mm unicating kC'y messages and
conne ct i ng the clot s.
many communities.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
PAGE
20
Spotlight on the District - Florida
Achieving the American DreamAre We There Yet?
Por as long as I can renwmber, pmchasing a honw has
Senate Banking Committee
been celebratrcl as a pi\·otal point in onr·s lifr, as a sign
in Frbrua1y :2007, thr Gm·-
of prosperity and prrsonal succrss. Onr of our goals as
ernm en t Acco untab ilit y
a soeirty has been to make it possiblr for more prop le
Offi cr rstima tr cl that th e propoI1 ion of nontrad il ional
to aehi rYe th r A mrrican drea m o f homeownershi p.
mo rtgages rose from 10 to :30 percrnt o f l he mortgagr
And \1·hile 11·r\·e been successful in b1inging the prrcen-
market bC'l 11·ern :200:3 and :200-3.
tagr of homrm111e1s to nr11· hr ights. thr causes for this
shirt arr difficult to pinpoint.
Feclrral agenci('S havr rxprrssrd concr rn about ri sks
According to th e l'.S. Crnsus, thr national homeowner-
A rrcenl statemrn t proposed on subprinw mortgage
ship rate was approximate ly
lending practicrs highl ights potential ri sks assoeiatrd
in hrrent in se,·rra l nont rad itional mo rt gage prod ucts.
(j:3
pe rcrnl in 196:) and
rr mained fa irly stabl e for the nrxt thirty yrars. I lm1·-
wit h particul ar adjustablr rate mortgagr products
rvc r, in thr mi d-90s a housing boom rai sed thr prrern-
inc ludi ng interest-only loans and option ARMs; simul-
tagr of thosr owning homrs higher rac h yrar until it
tai1rous firnt ai1d second rnoI1gagrs cal lrcl "piggy back ..
topped out at closr to 70 perc-ent in :2005. Morr than
loans; and products that do not rrquire \'C'rification of
1:2 millio n jo ined th e roster o f new homeo wn ers in
income or asse ts, known by th e inclust1y as "low cl oc ..
ju st o,·er a drcadr.
or "no doc" loans.
Exactly ,,·hat has caused this rapid incrrase•) Thr ai1s11·er
\\'heth er the hi gher homemrnrrship ratr is primarily
,·ari rs. deprnding upon whom you as k. Some stu dies
dur to a.ii r mironrnent of lo11·r r int rrest rates, to peoplr
indicatr tha t lower interrst rat rs all o wrd more prop lc
gettin g older ancl li\ing longer, or to the erration of new
l o ent r r the housing mai·krt. From the late 1980s th rough
mo rt gage products is un clra r to me . One thin g th at's
l he ra rl y HHJOs, int rrrsl fo r fi xrd-rat r mortgages
ce rtain is that th r mortgage inclust1y has changecl dra-
hm·ered aro un d 10 percrnt. By the mid-1990s, rates
mati cally and will probably continue lo r,·oh·e. Whil e a
begai1 dropping rap idly, bottom ing out al just owr :j per-
larger prrcentage of famili es in t hr LS. Pnjoy the
crnl for a fi xed 30-yrar moItgagr in 200:2.
Ameri can Drea m today th ai1 rver befor e, ri sks arp al so
grra tr r as markPtplace complrxitirs in crease. Onr of
Othrr studirs ind icatr that the aging of the popu lation
thP biggest challpnges ahead is to mai1agP risk in a way
has bren a strong factor in highrr le\'C'lS of homeo1rner-
that promotes ai1cl preseIYes housing oppm1 un ities.
ship. Ac-cording to a study from the Sa.ii Prai1cisco Peel,
a grrater pr rcentage of Baby Boomc rs compared to
past grnerati ons hm·e entrred the housing market. The
study additionally shows a direct correl ati on brt wrrn
longer lifespans and higher honwmrn r rship rates.
We havr also sren a dramati c shirt in t hr types of mort-
Juan C. S,mchez
gage products on thr mai·ket. In a testim ony br fore the
Comm unity A1Tai1s Officer
FEDERAL
RESERVE
BANK
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
OF
ATLANTA
o ne
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Innovative Approaches Help
Solve N.0.'s Housing Woes
THE LOW INCOME HOUSING TAX CREDIT (LIHTC) PROGRAM , CREATED BY CONGRESS TO GENERATE EQUITY CAPITAL FOR AFFORDABLE RENTAL HOUSING, HAS
BEEN AROUND FOR A GENERATION NOW. MODULAR CONSTRUCTION METHODS
HAVE BEEN IN USE FAR LONGER.
But the concept of using tax credits to finance modular
mul tifamily housmg development is novel. A New Orleans
labor hours compai·ed ,viU1 traditional site-built construction. A shorter construction period also reduces the risk
paiinership faced with critical housing needs has made
of sit e theft, ai1d modulai· w1its can be locked and seemed
Lhe leap.
as soon as they're put into place.
What did it Lake 9 Their goal was cleai·: to produce high
Although some local exai11ples of single-family modulai·
quality affordable housing in a short peti od of time. lllli-
infi ll housing exist to demonstrate the feasibility of this
malely, th e partnership la unched what's become Ne w
approac h, the partners nevertheless look a ris k since
Orleans' fi rst modu lar mu ltifamil y development us ing
many people remain skeptical about modular construction.
federal ho us ing tax credits.
The new deve lopment, Louis iana Freed me n Homes,
The evolution of modular construction
consists of 29 tlu·ee-bedroom, two-bath apaitments situ-
Thanks to ad vances in quality and design, modula r
ated on three acres in U1e Uptow11 neighborhood between
co nstruction has been gai ning acceptance as a \ia bl e
Audubo n a nd Broadway Streets just south of Earhart
opti on for afforda ble hous ing in ma ny comm un iti es.
Boul eYard. All of the units are reserved for low- and
In fa ct, improveme nts in th e past decade ha\·e been
moderate-income famili es.
so great that many modular homes may be considered
be tter quality ho using than s om e trad itiona l, s iLe-
New Orleans' slow recovery
New Orl eans continues to stru ggle with replaci ng
bui lLconstruction.
Confusion still exists regarding mod ular ho using in
affordable housing destroyed by Hurricanes Katrma and
comparison with "HUD Code" manufactured housing.
Rita. Acute housing needs motivated the paitners to con-
Whil e it may appear to be the same, HUD Code homes
s ider nontraditional construction methods that involved
are built according to federal 1-illD codes applicable ill all
lower costs for both labo r and materials. Modular con-
50 states; modula r homes, o n the othe r hand, are built
s truction costs less per square foo t because mass pro-
us ing the same codes as ai1y other local constru ction.
d ucti on results in economies of scale.
HUD Code homes can only be single-fai11ily res idences,
Modular constrnction is also a practical solution fo r
some of the particulai· problems s lowing construction in
Ne w Orleans, in clu ding labor s ho rtages a nd theft of
scarce bui lding materials. It requ ires far fewer on-site
FEDERAL RESERVE BAN K OF ATLANTA
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Federal Reserve Bank of St. Louis
but modular s truc tures can house s ingle families or
mul tiple fa milies .
Modulai· homes must comply with the san1e state or
local codes used by bui lders of traditional structures.
I h re e
Th e photo shows th e different ph ases of th e Louisiana Freedm en Hom es and how th e developm ent com es togeth er qui ckl y from buildi ng t he found at ions to placing th e modul es and constructing th e front po rches aft er th e units are in pl ace.
Fo r instance, t he sa me wincl spc'(' d st anclarcls appl y to
subsidiaries, I !o rion I lo nlC's Inc. and Dynasty I lonlC's Inc.
m odu lar c·onst ru cti on. Tlw manurac t urer o r t lw uni ts
T lw company makPs most of it s sales in t he So ut lw ast.
being cle,·elopPd in :,,Je,,· Or ipans, like builders o r t racl i-
I lor t on (' mployees do the actual lirt ing ancl placement of
t ional, sit e-built homes, must build to w ithstand a max.i-
its unit s, and t hey guarantee to r epair or r ep lace any
mum w indspl'<'d or 130 mph.
cl anmge resull ing fro m t rm1sportat ion or to fix any probll' ms that stem rro m f'a c-tory erro rs.
The homes
Louisim1a l·' n'Pdmen Homes consists or 1-"i buildings-
The partners at work
1-1 t \\' O-s to r y dupl exes ancl a si nglP- f'arnil y n's id ence .
As \\'it h most afTo rclabl e housing cle,·elopnw nt s, t lw
Eac h unit co nta ins appro x im at ely 1,:250 squa re fee t.
modu l,u· project began with a 50 l (c ){:3) nonpro fi t o rgan-
Dupl ex un it s ha,·e fo ur modu! Ps stac k ed two by t\\'O.
izati o n, Louisiana l"n•eclmen I-Ionws LLC. Represented
11·it h one uni t on each floor. Site-built front porclws in a
by doz('ns of local churches, the nonpro fi t O\\llC'cl tlw raw
Npw Orleans sty le ancl high-pil clwd roo [li nes l hal rdkct
lm1d and will hm ·(• ongoing ownership ancl man agement
t lH' dominanl arl'hil ectme in llw w·(•a c-reate an autlwnti c,
o r lhe property.
local look.
A dl'\'l' loper ancl gen eral cont ral' tor wh o ha\'P hacl
Qm1lity opli ons chosen by tllC' dP\'l' loper ,UH i bui lcler,
ex pC'ri Pnce \\'i t h modular cl e,·elop nwnt ar e impo rt ant
such as 9-f'oot ce il ings, ce i li ng rans, , ·enet ian bl incl s,
l o th e success o r a modular proj ect. Th e de,·doper is
woocl crown molding and w indo w sills, pm·quet ll ooring,
key in es tab l ishi ng lh e bui ldi ng plans, and th e ge1wral
c·ernmic til e and high-grade carpet ing, adcl to t lw appeal
cont rac l o r m ust han ' specialty sk ills to constru ct lh e
or th e un its. 0 1her features includl' central heal ,me! a.ir,
inf'ras t ru ct ure be fo re th e m od ul ar units can be pl aced .
a washer ancl dryer, ,rnd high-qualit y ki tcllC'n app liances,
De,·eloper Jm1H'S E. ".Jam.ie" Ne, ·ille, p resident of Ne,·ille
c-a binetry, c·ounlert ops and sinks.
Dev(•lo pn 1enl LLC' , w o r ks w ith ge1wra l cont rac to r
Struct ural upgrades hm·e also been aclclecl: :220\' eleetric-al w ir ing is s1wc if'i C'd as opposc'd to th e standard ll OY
1w rmittecl under local codes,
,Ls
11·pll
,L5
th ermal w indows
Keith Le Duff of Keith Le Du ff General Co nt rac to r.
Th e bank repn •sentati, ·e is Y,·ett e Cola, ,icC' p resident
and co mm er cial r c' a l es t at e r elati o nship m anager at
and doms. Tlwse ancl other 0nc'rgy-sming cl 0sig11 elC'ments
Rl•gions B,Lll k, wh ich is doing the constru e-I ion m1cl per-
w ill proviclC' exc-C'llent paybac k to n'siclC'nts m ·er t imC'.
manPnt financi ng for t he project. As part of th e fin ancing
Based in Eato nton , Ga., llo rt on Industri es manuf'aclures about 100 modular unit s per w ee k thro ugh it s
f our
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
pal'kagl', Louisiana l·' reedmen ll onws sold low-incom e
hou sing tax credits to Hegions Bank ,me! obta.i necl layered
VOLUME
17,
NUMBER
1
fin anci ng th at inc luded Lo ui siana I l o usi ng Fin ance
Whil e there is much to app laud about the suc-cess ful
Age ncy's 11O!\I E fund s, Gulf Opportuni ty Zo ne (GO
constru e-l ion and finan cing of the !llodular mull if'a mily
Zone) cre dit s. energy c-redi ts. lrn' raged pr in1t e i m ·est-
de,·clopment, thr real c-Plcbrati on is about the :2!) fami-
m ent an d fundin g from oth er so urces .
l ies wh o no w han· sak, decent, afford able ho using.
Louisimia FrPcdmen H onws stands as a model fo r futurt'
Bringing it all together
den'iopment in I he Gulf ( 'cmsl region mid elSP \1·lw n'. In
This dynami c- parlm' rship brought logelhPr an innovaI i\·e produ c-I and a new fin ancing approach l o mcel New
fac-I , .Jam ie NPv il le ancl l(P illt LeDufT al ready antic ipal c
cl el'<' ioping aclclil ional rn oclul,u· subdi \·isions. ♦
Orl eans· pressing need for affordable housing. The cit y
and Orl ea ns Pari sh und ersto od I he projt'cl and w ere
\\·i lli ng to gra nt pe rmi ts . .Jami e :O:e\·illc 110tl'CI th at the
greatest chall enge \1',LS coll\inc-ing all the pmti cipan ts to
mm·e at a pace that seemed \·ery rap id colllp,u·ed \\'ilh
traditional site-bui lding.
T his ,Irl ic il' was \\'ril tcn by l\layt1 l' Sn1i l h, co111111unily affai rs
cli rPc-l or al thP All a11 ta Ped.
Por n1orl' infor 111at ion about l l011011·s modu l,u- di\ision. rPfl'r 10
\\'W\\'.l1on onho111Ps.eom/ho r1 01m1od ul,urnain.ht111. To Sl'l' ll oor
pla ns a11cl ren dN ings. re fp r l o N(• 11· O r lt•a ns ~lodu lar I l o111Ps·
\\'C'bs il (' al \\'\\' \\'.llOlamocl. (·0111. SpPc i lic- clup lPX plans llSPcl in
Louisi.u1a FrePdnwn I lomPs ,m• --·nw Orll•,ms .. ,mcl "Th(• \ 'ic101ia ...
More on Modular Housing
T l1C' lntenwl provicit' s in nu merabi t' resou n·ps fort hose
cost t'stim atP ,
seeking more in fo rmati on about fac tory constrn cti on.
wh ich will in c- luclP on-
Such in fo rm ati o n co\·ers th e enti re spect rnm of co n-
sitl' const ru cti on compoIw nt s
sumer interests, from lo w er in co me singlP family and
such as I he foun dation , sP w er/ sc pt ic
multi family homes to multimillion-dollar modular lllan -
in frasl ru e-t u re. other utilit y connections. cl.1i1·c\1·,w mid
sions. Som e lux w y homes ha\·c 0\T r 8,000 squar e fpc t,
\1·cl.l lrn·ays, and porch or deck addi tions. Consiclt'r 1·,u-i-
totally dispelling old noti ons about the procluct. But l;u-gc
ous financing options in acln mce. Don't fo rget tl w cost
or small, the th ought process is b,Lsically thP same \\'hen
of honH'CJ\n ier's insurance.
unde1taking modular const ru ction.
Decide on a manufacture r.
Determine the home site and dwelling plans.
Whi le a m anufacturpr ca n assist in fin ding a bui lder,
Th e land ,rnd it s zoning \\i ll initial ly dictatt' \1·hat can and
an t'X pl'I'icnccd local builclrr can also ,Lssist in fi nding
can't be cl onP w hen expl oring options regardi ng th e typ e
the most appropri ate manufac-turcr l o meet th e buyer's
o f home that n rn be built .
nepds. For exampl e, requ t>sl for spec ia l acco nrn1 oda-
Find the best builder for the job.
able l o make cert ain customizations. Another c-0 11siclcra-
ti ons could narro w the op ti ons t o tho se co mpa n ies
Consumers cann ot general ly buy mod ular un it s facto ry
tion is I he ex t cnt I o which c·usl orni zal ions might cont ri-
clircct, \1·hi ch helps ensure proper placenw nt o f modules
but c to delays.
on site. But llloclular fac-tori es can o ft en assist in fin ding
local de\'clopcrs and builders wi th expcri PnCP in tlwse
Follow the process.
products. Be sure to d wc·k references and inspect past
As wil It builcling a traditional house. staring on top o f
proj ects. Seek competiti,·r bids to ensm c gett ing the best
the proc<'SS C'H'I) ' step of lhe 1\·ay \1·ill help ensure that
deal, which is not al\\'ays the least cxpensi1•p proposal.
things go smoothly.
Work out the budget.
An cl Ilw catch-all rule o f th umb•) As 1\·ith cntC'ring any
T he budget will hel p dl'term ine tlw size o f t he home ,
fo rm of horn cO\-r n ership, I he more I lw consumer kn ows
it s features and w het her an ar chit ec t is nPt' ci cd. The
the betI Pr 1
cip1·cl oper or builder gp1wrally 111m1ages th e total proj Pcl
FEDERAL
RESERVE
BANK
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
OF
ATLANTA
f i Ve
Courting the Creative Class:
New Strategies for Urban Revival
INSPIRED BY RECENT RESEARCH, CITY PLANNERS HAVE BEGUN TO THINK
STRATEGICALLY ABOUT ATTRACTING A DEMOGRAPHIC THAT BY ITS VERY NATURE
PROMISES TO REVITALIZE URBAN LIFE-THE CREATIVE CLASS.
Whal is the "creative class " an cl how impo rt ant is
this sector of society in fostering urbru1 ,ital ity'7 In his
book Tlir Risr o.f th e Crealit·r Closs , C~eorge Mason
L' ni\·ersit y Professor Richard Flo1icta describes a group
of yo un g, educated , highly mobile workers who are
employee! in information technology, health cru·e, finru1ce,
sc ience, the arts and oth er know lecl ge-base cl fi elds.
Acco rdin g to Florid a, they represent th e future of the
U.S. economy.
City plrurners have typically foc used on investment in
physical infrastructme, commercial real estate and new
housing construction to n:•,·italize c·ommu nities. But
now t hey are considering new approaches.
Redevelopme nt ini tiatives have thu s far tended to
targe t traditio nal famili es as c ities co nt encl eel with the
suburbs for growth in this demographi c gro up. Urban
economi c development programs usually em phasize job
recru itment, wor kforce deve lopment and tax incentives
lo lru·ge COll)Orations.
I n the past fi,·e years, howe,·er, some cities hm·e
started to e,·al uate their mtique appeal to nontraditional
demographic groups. Creative class workers ru·e li kely
lo choose a location before I.hey choose a job, and they
seek out. cert.a.in cities because of the cu lt ural ru1d other
1u·esty le ru11en ities offered. The creati ve class also values
inc l usion of gays, imm igrants an cl o t her nontradi-
alternative lifestyles. His research has shown that many
tional groups.
cities alt ract ive to creative workNs also han• a high
concentral ion of gays. Florida's exp lanati on for thi s
Creative class values diversity
Florid a ru·gues that workers in the creati,·e class want
divC'l'sily in I.heir communities ru1el value acceptan ce of
six
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Federal Reserve Bank of St. Louis
finding is I hat a co ncentration of gays is a proxy for
tolerance- one of the factors irnpo1ianl in the location
choice of I he c-real ive class.
VOLUME
17,
NUMBER
1
Because gay- and l<.'sbian-friendly comm uni ties
of tlwse neighborhoods are r<.'cognized for their cultmal
app<'ar to be a harbinger of urban ,itality, some citi<'s
amenities, cli,·e1,;e housing stoc k and ,ibrant commer-
arC' considering st rategies to attract gays ancl lesbians
cia l centers. These ar eas pride th emse lves on being
to communities in need of new in\'estment. The city o f
to lerant an d open to di,·ersit y, and as a resu lt ha,·e
Baltimore , 1,·here city officials ha,·e acti,·ely de,·eloped
beco me cen ters not only fo r gay ancl lesb ian popula-
marketi ng strategies to attract gays and lesb ians to
t ions, but also for the creati,·e class generally.
nei ghbo rho ods ripe for r evitalization , is th e examp le
Why gays, lesbians and the
m ost ofte n cited.
This strategy has raised signifi cant quest ions about
why cities would want to fo cus on attracti ng gays as
reative clas revive neighborhood
Nationwide, th e gay popu lation has been more willing
well as why gays might ha,·e a preference for li,ing in
tha n traditio nal househo lds to m ove into run -cl own ,
certain urban communi ties. It also raises a larger ques-
racial ly and ethni cally cli verse neighborhoods that may
tion about th e connection between gays and demographic
have higher crim e rates than more stable neighborhoods.
di, ·ersity in cities that appeal to creati\'e class workers.
This obserrntion might extend t o inc lude members of
New studies suggest that this diversity provides not only
the creative class w ho are yo ung, adventurous and in
social bene fits, but brings economi c benefits as well.
need of afford able housing. The neighborhoods th ey
se lect often ha,·e more affo rdable bu t ar chitec tu rally
Bringing back distress .d neighbo ·hood
The size of the gay population in a community is not
unique homes 1ipe for renovation and investment. Investment by gays and lesbians has helped transfonn neigh-
typically measured, so it is diffic ult to quan tify the ir
borh oods, and realtors tout th e presence of gays as a
economic impact on Lu-ban revitalization efforts. I l owe, ·er,
sign of an up-ancl-coming neighborhood.
Gary Gates, a research feUo,1· at the L"CLA School of Law,
Gates has clone extensi,·e research to cletem1ine 1,·hy
has attempted to analyze the role of gays and lesbians in
gays and lesbians ar e more likely to locate in distressed
neighbo rh ood development. His research shows that
communities. One of the key factm,; he cites is that gay
neighborhoods with a high number of gay househo lds
households are not as li kely to ha,·e children as tradi -
ha,·e higher housing values than comparab le neighbor-
tional househo lds. As a result, gays may be less con-
hoods composed primarily of trad itional co upl es. The
cern ed w ith school qualit y and less worried about higher
study inclicat es tha t th e re,italization efforts o f gay ancl
c1irne rates. In add ition, gay and lesb ian households may
lesbian homeowners have over time made neighborhoods
have more disposable income available to put towards
more attracti,·e to al l types of households, including those
renovation of th eir honws because they do not ha\'e the
with traditional family stru ctures.
expenses that co me w ith children. Th is same reasoning
While there is a lack of quan tita ti ve data, extensive
cou ld be app lied to members of the creative class as a
anecdotal e,·icl ence exists to show that i1ffestment by
11·hol e. ,1·ho may also be single or childless and more
th e gay population has led to the rehabilitati on of hous-
tolerant of di, ·ersit y.
in g stock and new business opport uni ties in many
Real estat e agent s and word-of-mouth referrals ha\'e
communit i es across the country. Gays ancl lesb ians
been the primary tools used for attracting gays to cer-
haw a long-standing reputation for mO\i.ng into distressed
tain neighborhoods. Howe,·er, some citi es hm·e started
neighborhood and re,italizing homes and businesses.
to recognize that t he gay popu l ation is a significant
Some or the most \\·ell-kno1,·n examples inelucle San
resource for urban re,italization. Encouraging gays to
F'rancisco's Castro Dist1ict, Dupont Circle in Washington,
lead revitalizati on efforts can be a cost effecti,,e strategy
D.C .. Sout h Beac h in :\liami and Florid a·s Key \\'est.
for cities. The city ,1ill not on ly receiw higher tax rew-
Lesser-known examples include the East Nash,·il le
nues from the impro,·ecl properties, but, beca use gay
neighbo rh ood in Tenn essee, l\1idtown Atl anta an cl
ho useholds are less likely to ha\'e k ids, th ey will not
the Historic Kenwood area in St. Peterbsurg, Fla. A ll
place an add iti onal burd en on schoo ls.
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s eve n
,,·hile ignoring adPquate opportu nil ies ancl senic-0s for
\\'hi IC' d0,u· 0,·id0nc·C' C'xists about I hC' impact or ga~·s
I rnditional middle-c-1,t<;S families.
and l0sbians and tlw creati,·0 c-lasses g0n0ral ly on the
n•,·it al iza t ion of cl isl r<'SSC'd neighborhoocls, I h<' rC' is a
broacl0 r argu ment about I lw signif'ic-anc-0 or I his group
!'or t lw C'c·onomi c compC'I ii i,Tn<'SS of cities ancl rC'gions.
i\c-c-orcling to Florida. a large gay population is an incli-
Citi es ,U-C' al ways looking for new sl rat egiC's lo rev ii a1izc' c-o mmun il i(' S. at I racl busin C'sses and C'nco urage
ec·onomic- growth. Traclitional programs that inc-rc•asC'
c-a tor of ho,,· open th e community is lo rw,,· and nontra-
alTonlablC' housing, c'ncourage C'conom ic cl C',·elopnwnl ,
ditional id0as . and it is this typ e of nC'ali,·ity that is
promolC' C'ciuc-alion ancl impro,·C' public safC'ty wi ll always
JH' edC'cl to genl'J'all' ('('Ono mic gro ,,·t h. I l o ,,·e,·l'J", a
be nec'clecl. ll o,,·0,·<'r. citi es t hat an' ab lC' to leYerag<'
st ratC'gy foc-usC'd C'nl irC'ly on r0uui1 ing ga,vs and c-rc'at iYe
tlw strength ancl nPati,·ity or a ll of' thei r r0sidP11 t s
workers to Ii,·0 in a cit y wi ll not 11C'c·0ssarily imprm·e the
ancl that arC' inc-h rsiH' ancl toiC'ranl or dilTPrent popu la-
C'c·o nomi e ,·ita lil y in a eo mnrnni ty, nor will ii IC'acl to
1ions wi ll hm·C' a st ron g<'r fou ndal ion for accomplishing
n'\'it aliza t ion or all inner c it y neighborhoods. Planrwrs
I lws<' goals.
♦
must SC'C'k a broader stra t0g_v I hat looks al all o r t lw attributes that make a communit y d0sirnble.
\VhilC' tlw c-rc'a ti,·C' c-lass may bring nC'C'CIC'd capit al into
This arliC'lP ll"as \\Tilll' ll I,~· .Jessica Lp\'l'('ll Farr. rpgional
('Olllllllllli ly dC'\"PlOpllH'lli managPr in th P i\lla nta fpd"s
Nash,·illP BranC'h.
dPpressC'd c·om muniti es. it is important lo n'cognize
S(' \"('J'ai potC'nl ial cl0\\"11 SiclC's of I his i11\"eSI ment. First.
sonw existing n•siclC'nls may not IH' \\·illing to embrace
References
rww demograph ic- groups mm·ing into th eir rwi ghborhoocls, C'SPC'Cially if' t lw r0sul1 is a signifi cant change in
t lw soc-iOC'C'Ono mic- compositi on or th e neighhorhoocl.
S<•c·oncl ly, as neighborhoods impron' and ilC'c-ome more
Crrati,·e Class (;roup. <http://www.c-rmtivrclass.org/>.
l kwan, Simi la. "Citirs Compete In llipness Battle To
Attract Young," Nr•11· )'(irk Times, Novrmbrr 25, 2006.
altract i,·e to a widC'r populati on, ho using pric·ps will
irHTC'aSC', making it more dif'fkult for c'xisting r0siclPnts.
<•,·<•n thC' first '"urban pionPNs·· ,,·ho mo\"l'd into th e
c·ommun it y, to maintain thei r hon1C's. This can l0acl to a
Florida.Richard . "Thr Rise of th e Crrati,·r Class: Why
cit irs ll"ithou t gays and rock bands arr losing thr
rc-onom ic dr,·rlopment race," \\'os//i11gto11 i\1011/h/y, ~lay
:W0:2. <hi tp ://www.washingtonmon1hly.com/ fea turrs/
2001/0205.florida. hl ml>.
shift in lhC' ch,u·acl Pr or thC' c-ommtmily, a<; m ·er limp it
l)pc·omC's l0ss o r an alt0mat i\"(' pnc-la,·p ,mcl mon' o r a
rwi ghborhoocl for ,,·0althy housPholcls.
SomC' also questi on ,,·hC'tlH'r c-ilic's arC' becoming too
c-onc·ernC'cl wi th markC'ling th<' lllsl'ln•s l o non tradit ional
demographics. ( 'ril ic-s of th<' c-real iv<' class argumC'nl
claim that cities are starting to c·ompc'tC' ,,·ith each olhC'r
to clrn,,· tlw c-reati,·C' class ancl are ll<'ing clistract<'d from
f'ulf'illing their con' fun ct ion s. lnslea cl of' foc usin g on
Gatrs, Gmy. <hllp://www.urban.org/GmyGates>.
~1oss, ~litchell. "Rrinvrnt.ing thr Crnlral City as a Placr
to Li,·r and Work," I /011sing Pol icy /)e/mtr•, Vol. 8, lssur 2,
Thr Fannie Mar Foundat ion, 1 rw York , 1997,
<http://,1f\\'\v.milc-hr ll moss.com/a1ticles/crntralcity. html>.
Swopr, Clu·islophrr. "Chasing thr Rainbow: Is a gay
population an rnginr of urban rrdrn l'? Cit ies ar e
beginn ing to think so, " Go1•erni11g, August 200:3,
<ht t p:// www.govp rning.com/ trx t book/gays. htm >.
afTorclab lC' hous in g, rC'eru it in g rw,,· busin0ssc•s ancl
anwnit iC's, tlw art s ancl coffe<' shops. Opporwnts argue
Thr l "rban lnstitutr. "The Demographics of Oi,wsity:
\\'hy Cities Arr Courting the Ga~· and Lrsb ian
Communit y," .Junr :J. 200:3, <http://,,'\nv.urban.org/
th at thi s strategy r0al ly on ly ll<'rwf"ils th e wea lthy and
url.cf'm?ID=9006:l I>.
im·es tin g in schools. cii iC's are emphasizing cultural
inc·n'aSC'S the disparit y bC' tween thC' hm·C's and th<' hm·C'nots. Prom this p<'rspC'ct i,·C'. c-iliC's m ight risk lwc-omi ng
ha,·ens for \\'ealthy, young, a lt erna ti,·C' popu lati ons
e ighI
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Federal Reserve Bank of St. Louis
VOLUME
17,
NUMBER
1
GO Zone Tax
Credits and
Incentives
HURRICANE KATRINA, WHICH WREAKED AN ESTIMATED $86 BILLION IN
DAMAGES ACROSS 90 ,000 SQUARE MILES, RANKS AS THE MOST EXPENSIVE
NATURAL DISASTER IN THE HISTORY OF THE UNITED STATES.
On llw heels of Katrina ca.inc- t \\·o morc- hurric-anesRita, which affc-ctecl th c- southwc-stern po11ion of Louis-
on' r 200 bm1kers. i11\"estors ancl otlwr financial profPssionals from as fa r away as Canada. Th e
ms, the
l '. S.
iana and Texas, and \\'ilma, \\·hich S\\·iped southe rn
Dc-parlnwnl of llousing ancl l·rban Dc-\·rlopmc-nt and 1lw
Florida. In response lo thesc- devasl aling hurri canes,
LT.S. Dc-parl mPnt of I lw Treaswy e:-..7)lainc-d how fimrndaJ
CongrPss passPd a package of tm, re li l'f. ,rnd incentiYes
inst it utions ancl tlwir customers could benpfit from tlw
desig1wcl to ju mpstai·1 economic- recovP1y by providing
nc-w lc-gislal ion.
much-m'eded businessPs and sPnices in hard-hit meas.
lkcausP llw tax crc-clits arc- irnplc-ment c-d by tlw
ms,
The Gulf Opportuni ty Zo,w ((;0 ZonP) Tax lnc-en-
ii is diffi c- ull l o quan ti fy how many projec-ls hm·c- hPrn
1i\·es and Reli ef Act m akes arnilab le alm os t $ 1-1 bi ll ion
prompt rd by th e program. I lo\1·e\·pr, AJabama·s Gm·c- r-
in fedPrn l tax incent ivPs l o enc-o urag<' bus im•sses l o
nor Bob Ril<'Y has n•sc-1vc- cl up to $D00 m i ll ion in l ax
im·esl in l he region. An addi li onal aw,u-cl o f $-100 million
inC-<' nli\·c-s ancl pro\·isions un der llw GO Zo1w Ac-I that
in la'\ uwli ts from thP U.S. Dc-parlnwnl of the- Treasury
w il l likely lw used l o alt rac t a sl <•c• I planl lo Mobil <'.
is expPc-lPd in fall 2007. The
c;o Zo ,w
slrelclws as far
Lou isiana is also c-onl r ncling for thr plan I. 01 hC'I' pro-
1101th as .Jackson and Colum bus, i\l iss., and as far easl ,Ls
jec- l s apprn\'<'d tho ugh bond allocations for A labama
Tuscaloosa, AJa. In Louisiana, it incluclPs not only :\'e\1·
inc- lu dc- $2.(i million for tlw Demopo li s llotC'I and
Orl eai1s, but aJso Baton RougP. The- prognrn1 exlPncls l o
$T'i.ll mill ion for A labama Power.
:31 pai·islws in Louisiai1a, -HJ count irs in :\lississippi ai1d
11 in Al abama.
Loui sia na has won prrlin min ary appron1 l for a
$1.j0 million film and digital studi o in one of tlw anw; of
\e\\. Orleans srriously affec-tecl by flooding. Th is is the
firs! Louisiana proj ec t that \\·ill br Pligiblr for GO Zonr
A rec-c-nt seric-s of information sc-ssions about (;() Zonr
tax-l'rr e bond financing. The studio \1·01ild ge ,wrnl r
in cenliq's hoslrcl by the- i\e\1· Orleans bra nch of t he
an Pslimated 2.000 trm po rar y cons tru ction jobs and
Fc-deral Resen·c- Bank of Atlai1ta in .Janu,uy 2007 clre,\·
about 2.000
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llC'\\.
1w rm anrnt jobs \\·ith a pa~-rol l of
nine
Sl:2,5 .:3 m i llion. Oth er Lo uisiana proj pc t s th at cou l d
:2008. Becausf' mate1ials and skill ed labor are scarce for
benC' fit from t he l egis lat i on are in th C' p i pP lin e:
constn1ction proj ects as far aw ay as Flori da ( whi ch is
• a S9 mil lion new components factory fo r 8-1 Lumber
Company in Hammond ;
• a $3.5 million new plant constru cti on for Baumer
Foods in La Place;
• a $6 million new building systems factory for
ABSI/Enrn1eduC' in Jefferson Pari sh;
• a $65 million plant expansion fo r Dow C' hC'mical
in St. .John the Baptist Paiish;
• a S71:'i million Hyatt Regency clO\rnt0\111 re\itali-
still recO\·Pri ng t wo years later from Hurricane h ·an),
New Orl eans' prospects fo r r ebu il ding remain unclear
and the "place' in SC'rvi ce" elate of 2008 SC'C'ms unrC'al isti c
if not impossible' l o achieve.
Secondl y, insurance costs for commercial businesses
ha\·e incrC'asC'cl as much as 268 percent, severely cramping cash fl ow and profitability. Proj ec ts C'ligiblC' for lowin come housing tax credits typ ica lly maintain small
operating mai·gins and thus ai·e not able to absorb th e
zati on project including a 20-acrC' multi-use' center
addi tional costs or \·olatility. Estimates indicate that as
and par k rede\·elopment in Orl C'ans Pai·ish;
many as half of th e all ocated GO Zone credits are in
• a $200 million luxmy residential, hotC'l and retail
compl ex, Trum p Tow er, in OrlC',:UlS Parish.
j eopai·dy cluC' to skyr ock eting i.nsurai1ce costs. RecC'n tly
delegatio ns from I he affected areas have bC'C' n pel iti oning CongrC'ss to extend th e credits th rou gh 2010 ,
Challenges persist
and the outlook is favorable.
♦
Al th ough much optimism sLuTounds th C' po tC'ntial for
ne\I· investment, two significant challenges could thwaii:
This article' \\"a5 \\TillC'n by '.\ancy :\lontoya, rC'gional community
dC'\·elo pmC'nt 1mmagC'r in !he Atlanta Fecl·s '.\ c"" Orleans branc h.
businesses' ab ility to take aclnmtagC' o f th e incentiYes.
Fi rst, th C' cred its and incentiYes ar e slatC'd to expire in
What Does GO Zone Legislation Provide?
THE GO ZONE ACT PACKAGES A BASKET OF TAX INCENTIVES AND CREDITS THAT HAVE
THE POTENTIAL TO SPUR ECONOMIC DEVELOPMENT AND INCREASE THE PRODUCTION
OF AFFORDABLE HOUSING. SOME OF THE SIGNIFICANT MEASURES ARE:
• Expansion of low-income housing tax credits
within the Zone. Allocation o f low-income housing
ti on further rul es that in diffi cult-to-develop ~u-eas
in t he GO Zone, th e cr edit can be calcul atC' cl at
tax creclits rose clrai11atically for 2006, 2007 ai1d 2008.
130 percent o f th e basi s of th e property ra th er
In Loui siana., for exampl e, h ousin g t ax cr edi ts
th an 100 pNcent.
jumped to 10 tim es the annual amount per capita
prior to the storms. In M ississippi th C'y increased
6 tim es the annual amount per capita. T he legisla-
ten
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
• Increase in the rehabilitation tax credit to
help restore commercial buildings. GO Zone
VOLUME
17,
NUMBER
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I
• Extens ion of net ope rating loss carryback.
legislation raises th e existing tax credi t fo r rehabilitated bu ildings constructed prior to 1936 fro m
The net operating loss (NOL) carryback period is
10 percent of quali fi ed expenditures to 13 percent.
extended from two to five years for losses attribu-
The creclit fo r certified histo1ic stm ctures increased
ta ble to repair of existing investment clan1aged by
from 20 p erce nt to 26 percent. To qualify, reha-
Hurricane Katrina; business casualty losses clue to
bilitati on exp enses must be incurred betwee n
Hurricane Katrina; moving expenses and temporary
August 28, 2005 and December 31, 2008 and m ust
housi ng expense fo r employees wo rking in areas
meet guidelines related to structure, facades,
damaged by Hurri cane Katrina; losses created due
brickwork and other requirements.
to claiming the 50 percent bonus dep reciati on on
assets placed in service witllin the GO Zone.
• Additional bonding auth o rity. To assist in the
rebuilding effort, the bond authority granted to the
• Demolition costs. Fifty p erce nt of demo li tion
GO Zone states has been raised by approximately
costs paid or incurred before January 1, 2008 can
$7.9 billion fo r Louisiana, $4.8 billi on fo r Missis-
be expensed.
sippi and $2. 1 billion fo r Alabama. This special class
of tax-exemp t, private activity bonds called GO
• Reme diation expens ing. Costs incurred prior to
Zon e Bonds may be used to fi nance acquisitio n,
J anuary 1, 2008 th rough quali fi ed enviro nmental
construction and renovation of com mercial rea l
remecliation ins ide the GO Zone, including clean up
property or residential rental property at an interest
of petrolew11 products, may be expensed. (Typically
rate savings of up to 2 percent. The adclitional bond-
these costs must be capitalized.)
ing authority expires after 2010.
• Ex panded Work Opportunit y Tax Cre dits
• A 50 percent bonus de preciation within the
(WOTC) . The Katrina Emergency Tax Relief Act of
Zone. Thro ugh this incentive businesses can clai m
2005 (KETRA) allows employers to claim WOTC
an additional first-year depreciation deduction equal
credits for hiring an y employee in tl1e GO Zone area
to 50 percent of the cost of new property invest-
who lived i.11 the core disaster area between August
ments made in the Zone. The in creased depreciation
28, 2005 and August 28, 2007. Creclit extends to 40
allowance applies to software, leasehold improve-
percent of the first $6,000 of qual ified first-year
ments, and certain equipment and real estate expen-
wages paid to eligible employees.
ditures used in th e active conduct of a trad e or
busin ess. All depreciation deductions would be
• Increased New Marke ts Tax Credits. $1 billion
exempt fro m Alternative Mi nim um Taxes. Th is
in New Markets Tax Credit authori ty for 2006 and
prov is ion ap pli es to pro perty placed in service
2007 is available for conunwlity development entities
through 2007 or, in the case of real property,
U1at serve clisadvantaged conummi ties in tile GO Zone.
tlu·ough 2008. (It should be noted that a business
may choose tax-exempt financing or bon us depreci-
• Increased Hope Scholarship and Life time
ation, but not both .)
Learning Credits. This provision doubles the Hope
Credit dollar amount to a maxim um of $3,000 and
• E nhanced e xpe ns ing for s mall bus inesses.
doubles the Lifetime Learning Creclit to 40 percent,
Gnder section 179, eligible small busin esses may
al lowing a maximum of $4,000.
expense up to $200,000 of investment made in th e
Zone-up fro m $100,000------on investments between
• Additional provisions include relief for small
August 28, 2005 and December 31, 2007. Legislation
timber owners, restructuring of outstancling debt to
lifted the phase-out floor for investment from $400,000
reduce cost to municipalities, and autl1orization of
to $1 million through 2007.
Gulf Tax Creclit Debt Service Bonds.
FEDERAL
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BANK
OF
eleven
ATLANTA
lfll t/ 11\t f tt fl't l ttlltt'tltlt'tt/11 l tt ll t'ltll"t!t/t l'i l llll lll'll ll'tlllt l ltt't ll' l"l ll' ll'/1'1/ltlfl'tlf'tlflt flt 111/lttf ltll'/111 I llltlt lll l/11111111 11± 11111111± 1±111
I
t
1111 I
II I
I Ill
11
II
I
I
The Subprime Mortgage Market
The development of the subprime mortgage market
Let me begin with some background. Subprime moI1gagcs ar c loans made to borrowers who arc perceived to
h,ffc high credit ri sk, of't en because th ey lack a stron g
credit hist ory or ha,·e o th er c haracteri sti cs that arc
associated with h igh probab iliti es o f defau lt. Havin g
emerged more than tw o decades ago, subprime mortgage lend ing began lo expand in earnest in the mid-1990s,
tlw expansion sp urred in large part by inn ovations th at
reduced the costs fo r lenders of assessing and pri cing
ri sks. In parti cular, tcchnologiC'a l advan ces facilitated
credit scor ing by making it easier for lenders to coll ect
and disse minate infor mation on the credit w orth iness o f
prospec ti ve borrowers. In add it ion, lenders clevelopcd
new tec hn iques fo r usi ng this inform ation to determine
und erwri tin g standard s, set interest rates, and manage
th eir ris ks.
The ongoing growth and development of th e second-
Remarks by
Chairman Ben S. Bernanke
Excerpts from the Federal Reserve Bank of
Chicago 's 43rd Annual Conference on Bank
Structure and Competition ,
Chicago, Illinois
May17 , 2007
ary mortgage market has reinfo rced the effect o f these
in novations. v\Thereas once most lenders held mortgages
on th eir books unti l th e l oans were repa id, regu l atory
changes and other developments have permit ted lenders
to more easily sell mort gages to financial intcrmedimi es,
wh o in tu rn pool mortgages ancl sell the cash flows as
sl ru c t urcd sc·curities. These securities typi cally o ffer
,·arious risk profiles and durations to meet th e im·estmcnl strat cgics of a wide ra11gc or investors. The growi h
of' th e seco ndary market has thu s given mortgage len-
The recent sharp increases in subprim c mortgage loan
ders gr ea ter access t o the ca p it al mark ets, lowe r ed
d elinquen ci es and in the num ber o f homes ent eri ng
transaction cosls, and spread r isk more broadly, thereby
foreclosure raise impo1tanl economic, social, and regu-
in creasing th e supp ly of mo rt gage cre dit l o all typ es
latory issues. Today I will address a seri es of quest ions
o r househo ld s.
relal ecl to these development s. Why have delinquencies
Th ese fact ors laid th e gro undwork for an expan sion
and init iations of foreclos ure proceedings rise n so
of higher-ri sk mortgage lending over the past 15 years
shaqJl/ 7 Ilow hm·e subprimc mortgage markets ac\justed·7
or so. Growl h in the mar ket has not proceeded at a un i-
How have Federal Reser ve and other poli cy mak ers
form pace, but on net it has been dramatic. About 7-1/2
responded , an d what ad diti onal ac tion s might be con-
million first-lien subpri me mort gages m·e now outstand-
sidercd'7 Ilow mi ght th e probl ems in th e market for
ing, acco unting for about 14 p ercen t or all first-li en
subp rimc m ortgages affec t housing markets ancl th e
m ortgages. 1 So-call ed near-prim e loans- loans to bor-
eco nomy m ore broadl y?
row ers w ho typ ical ly have hi gher cre dit sco res t han
t we Ive
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Federal Reserve Bank of St. Louis
VOLUME
17,
NUMBER
1
subp1ime borrowers but whose applications may have
fo reclosure or with payments ninety clays or more over-
other higheicrisk aspects- account for an additional 8 to
cl ue- rose s harply d uring 2006 and recently stood at
10 percent of mortgages."
abo ut 11 percent, abou t double the recent low seen in
The expan sion of subprim e mo rtgage lending has
mid-2005.'1 The rate of serious delinquencies has also risen
made ho meownership possible for households that in
somewhat among some types of ne::u,-prime mo rtgages,
the past might not have qualified for a m01tgage and has
although the rate in that catego1y remai ns much lower
thereby c ontributed to the rise in th e homeownership
than the rate in the s ubprime market. The rise in delin-
rate since the mid-1990s. ln 2006, 69 percent of house-
quencies has begu n to show th roug h to roreclosures.
holds owned their homes; in 1995, 65 percent did. The
In the fowt h quaiter of 2006, about 310,000 foreclosure
increase in homeownership has been broadly based, but
proceedings were initiated, whereas for the preceding
minority households and ho useho lds in lower-income
two years the quarterly average was roughly 230,000. 1
census tracts have recorded some of the largest gai ns
Subprime mortgages accounted for more than half of the
in percentage terms. Not only the new homeowners but
foreclosures staitecl in the fo urth quaiter.
also their communities have benefited from these h'ends.
The sharp rise in serious delinquencies among sub-
Studies point to various ways in which homeownership
prime adj ustable-rate mortgages (ARMs) has multi ple
helps strengthen neighborhoods. For example, ho me-
causes. "Seasoned" mortgages- mo rtgages that bor-
owners a re more li kely tha n renters to maintain their
rowers have paid on for seve ral years-tend to have
properties and to participate in c ivic organizations.
higher de linqu ency rates. That fact, togethe r with
Hom eownership has also helped many fa milies b uild
the moderation in economic growth, wo uld have been
wealth, a nd acc umulated home equity may serve as a
expected to produce some deterioratio n in credit quality
fin ancial reserve that can be tapped as needed at a lower
fro m the exceptionally strong levels seen a few years
cost than most other forms of credit.
ago. But o ther fac tors, too, have been at wo rk. After
Broader access to mortgage credit is not wi thout its
ris in g at a n annua l rate of nearly 9 percent fro m 2000
downside, however. Not s urprisingly, in light of their
thro ugh 2005, ho use pri ces have dece lerate d, even
weaker credit histories and financial conditions, subprirne
fal ling in some mmkets. At the sai11e ti me, interest rates
borrowe rs face higher costs of borrowin g than prime
on both fixed- and acUustable-rate mortgage loai1s moved
borTowers do and arc more likely to default than prime
upward, reac hing mu lti-year highs in mid-2006. Some
borrowe rs are. For borrowers, the consequ ences of
subprime borrowers with ARMs, who may have counted
defaulting can be severe-possibly including foreclosure,
on refinancing before their payments rose, may not have
the loss of accw11u.lated home equity, and red uced access
had enough home equity to qualuy fo r a new loai1 given
to cred it. Their neighbors may suffer as well , as geo-
the sluggis hn ess in house p ri ces. In a d dition , some
graphically concentrated foreclosures ten d Lo red uce
owners with little equity may have walked away from
property values in the su rro unding area.
their properties, especiaily owner-investors who do not
The recent problems in the subprime mortgage sector
beyond purely financial considerations. Regional eco-
occupy the home and thus have little attachment to it
With this backgrow1d in mind, I tum now to the recent
nomic problems have played a ro le as well ; for example,
problems in the s ubprime mortgage sector. In general,
so me of t he s tates with the highest de li nquency and
mortgage credit quali ty has been very solid in rece nt
forec losme rates me among those most hard-hit by job
years. However, that statement is no longer true of sub-
cuts in the auto industry.
prim e mortgages with adj ustable interest rates, which
The practi ces of some mort·gage o ri ginato rs have
currently account for about two-thirds of subprime first-
also contributed to the problems in the subprime sector.
lien mort gages or about 9 percent of all first-lien m01t-
As th e underlying pace of mortgage origina ti ons
gages o uts tandi ng. For t hese mortgages, the rate of
begai1 to slow, but with investo r demai1d for secmities
seri ous delinquencies-corresponding to mortgages in
with high yields still strong, so me le nd e rs evid ently
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thirteen
loosrned unden,1iting standards. So-c-allC'd 1isk-laye1ing-
Some borro\\·e1-s may ha,·e been misled about thC' feasi-
combin ing weak borro,,·er credit histories with other
bility of paying back their m011gages, and otllC'rs may
ri sk factors, such as incomplrtr inc·om<' doc-umrntation
simply hm·e not understood the somet imes comp lex
or
\'l'l'Y
hi gh c umulati,·e loan-to-\'a lue rat ios- l)('c-ame
more common. Thrse looser standards wen' likrly an
terms o ft he cont ract s they si gned.
As the probl ems in the subprime mortgage' market
impo1tant source of the pronouncrd rise in "c,u·ly pay-
hm·e become manifest, ,Ye ha,·e seen some signs of self-
ment clcfaults"-defaults ocCLmi.ng within a few months
con-ection in the mm·ket. Im·estors m·e scrutini zing sub-
of originati on- m11ong subp1i.nw ARi\ ls, Psprcially those
prime loans more carefully and, in turn, lrnders ha,·e
01iginatcd in :2006.
tightened uncl ennitin g standards. C'recl it spreads on
Altho ugh thr clr,·elopment of the sc<·ondaiy market
new subprinw sec·urit izations hm·e 1isen, ai1d the ,·olu me
has had great benefits for mortgagc•-rn arkct parti c- ip;;mts,
of mort gage-backecl securiti es issuecl indi cates th at
as I noted earli r r, in this episoclr the prnct ice of sr lling
subprime ori ginal ions have sl owed . Bu t alt hough I he
m ort gagrs t o in vestors may have co nt r ibutcd l o the
supply o f' credi t t o thi s market has been r educed-
weakening of unclerwi;ting stm1dm·ds. De1wnding on the
and probab ly appropriately so-credit has by no me;;ms
tenns o f th e sale, when an originator srlls a loan mid its
senicing ri ghts, the risks (includi ng, of c-oursc, ,rny risks
associated ,dth poor w1derm.;ting) arc lm·gC'ly passed on
MORTGAGE APPLICATIONS WITH
to lllC' im·cstors rather thm1 being bornr prinuu·ily by the
company that ori ginated the lom1. In add ition , incenti,·e
LITTLE DOCUMENTATION WERE
structures that tied originator re,·enue to tllC' number of
loans closed made increasing lom1 \'Olume, rat her thm1
VULNERABLE TO MISREPRESENTA-
ensu1ing quality, the objecti\·e of some lenders. Inwstors
normal ly hm·e th e right to put early-paynwnt-dc fault
TION OR OVERESTIMATION OF
loans back to the 01iginator, and onr might cxprc-t such
prodsions lo cxe1t some discipline on llw unclcnniting
REPAYMENT CAPACITY BY BOTH
process. I Iowc,·er, in the most recent episode, some 01;ginal ors had little capital at slake and did not meet their
LENDERS AND BORROWERS ...
buy-back obligati ons after the shaip rise in drlinqucncies. '
Int ense compe tition for subprinw mo rt gag<' busi nessin part I he n'sult of th e excess capac-it y in I h<' lendi ng
evapora ted. For example, even as pu rchases of S<'c- uri-
indusl ry lcf't ove r from the refin anc-i ng boom <'arii er in
tizecl subprin w mort gages for collateralized clebl ob li-
the decade- may also ha,·e led lo a ,1·<'akening of stan-
gations- ai1 imprntm1t somce of clema.ncl-hm·c clec-linecl,
dai·ds. In sum, some misalig1mwnt of in<·entin's, together
increas<' d purchases by im·estment bm1ks, heclge funds,
with a h ighly co mpetitiYe lending cm·ironnwnl and,
mid other prirnie pools of capital are beginning to [ill
perhaps, the fact that indust1y e>qJC'1ienc-<' with subp1i.me
the ,·oid . Sonw subprim e originators hm·e gone ou t of
mortgage lending is relati\·ely short, likely c-ompromised
business as t lwir lenders ha,·e cm1celled creel it lines, but
the qualit y of unde1writing.
others hm·e been purchased by large fin ancial inst it u-
T llC' ac-c-urac·y of much of th e informal ion on whi ch
tions ancl remain in operation. Imp01tantly, we see no
the undernTiling \\·as based is also open to qurslion.
serious broacler spi llO\·er to bm1ks or thrift institutions
'.\lortgage applications \\;th little docunwnlation ,,·ere
from the problems in the subprirne mm·krt: the troubled
n.ilnrrable to misrepresentation or o,·ercstimat ion of
lenders. for the most part. ha,·e not been institutions
rC'paynwnt capacity by both lenders and bo1To\\·ers,
" ·ith feclPrnlly insurecl deposits.
perhaps with the expectati on that rising housC' prices
would c-ornr to the rescue of otherwis<' unsound loans.
fourteen
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Whal about borro\\'ers already in distress'? The Bom·d
and other fpderal supeni.sory agencies hm·e taken actions
VOLUME
17,
NUMBER
1
to encourage the banks and thrift instit utions we super-
example, by contact ing borrowers to disc uss possible
vise to work with borrowers who may be havi ng trou ble
opti ons well before a sched uled interest-rate reset.
meeting their mortgage obligations. Often, loan workou ts are in the interest of both parties. With effective
loan restructuring, borrowers facing temporary econo-
Possible regulatory responses
Looking forward , th e Federal Reserve, other regu-
lllic setbacks lllay be able to work through their problems
lators, and the Congress must evaluate what we have
while slaying in their hollles, and lenders may be ab le
leai·ncd from the rece nt episode ai1d decide what addi-
to avoid the costs of forec losure a nd the losses usuall y
tional regu lation or oversight may be needed lo prevent
associated with selling a repossessed home.
a recurrence. In dec iding what actions to take, regula-
Servicers of loans aim to minimize losses, and they
tors must walk a fine li ne; we must do what we can to
appear lo be act ively working with thousands of indivi-
prevent abuses or bad practices, but at th e same time
dual borrowers to modify their mortgages. To so me
we do not want to curtail responsible subprime lending
extent , the dispersed owners hip of mortgages may
or c lose off' refinai1cing options that would be beneficial
combine with legal and accounti ng rules to make
to borrowers. ♦
s uccessful workouts more diffi c ult to ac hieve. For
example, the "poo li ng and servicing agreement " associated with a give n secu,itized mortgage pool may restrict
Footnotes
the share of acco unts that can be modifi ed. Accounti ng
rules that, in some cases, require substantially modified
1.
pools to be brought back on the originator's balance
sheet may dissuade lenders from undertaking workou ts.
And extensive modifi cations that reallocate expected
This estimate is based on data from the Mortgage
Bankers Association, adjusted to reflect the limited
coverage of the association's sample.
2. Near-prime loans include those securitized in "aJt-
A" pools and similar loans that are held on lenders'
books.
cash flows across different securities associa ted with
the pool coul d trigger a re,iew of those securities by the
ratings agencies. At the same ti me, if workouts a re eco-
3. Estimates of delinquencies are based on data from
nomically viable, then an incenti\·e exists for third paiiies
First American LoanPerformance. The rate of serious delinquencies for variable-rate subprime mortgages also reached about 11 percent in late 200 1
and early 2002.
lo purchase distressed pools at a discount ai1d to unde rtake the workout process. We see these purchases taking
place in the marketplace, a deve lopm ent that sho uld
help to in crease the number of successful workouts.
4. Foreclosure starts are based on data from the Mott-
gage Bankers Association, adjusted to reflect the
limited coverage of thei r sample.
Also, local co mmuni ty organizations that work to
promote homeovmership and prevent foreclosures have
s tepped up their efforts. For example, NeighborWorks
America advises borrow ers about restructur ing the ir
5.
Many mortgage brokers are subject to minimum
licensing standards and bonding or net wo1th criteria,
but these standards and criteria vary across states.
mortgages. A survey conducted by this group found
that mai1y homeowners do not understand that lenders
a lso want to avoid foreclosure. Th us, the simple step o r
encouraging borrowers in trouble to contact their lenders
ThC' full tC'xl of Cha irman Bernanke's speech is available'
al hI tp ://www. f'ede ra I res ervP .gm·/boardclocs/speC'c hC's/
:2007/:20070ci 17/clefault. ht m.
can be very prod uctive. The Federal Reserve and the
other supe nisory agencies have encouraged fin a ncia l
institutio ns to identify a nd contact borrowers who,
with counseling and fina ncial assistance, may be able
to avoid entering delinquency or foreclosure. Indeed,
some le nders a re be ing proactive in thi s regard- for
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f if I e e n
Case Making: Building a
Pathway to Implementation
In the following article, M. von Nkosi, former director of the Mixed Income Communities Initiative (MICI)
at the Atlanta Neighborhood Development Partnership (ANDP), shares his recent experience as a case
study of how to move an agenda forward-whether it involves housing, transportation or health issuesby leading from a place of shared vision.
How do you move an agenda? How cl o you get peop le
to bu y in and support yo ur cause so you can have an
impact on regi onal
chan ge·1
Combining a dedi cated sl afT, volunteers fro m grass-
Funding and synergistic circumstances
MICI grew out or a solid, nonprofit organization, AL'\/DP
Led by charismatic fo under, p resid ent and CEO Hattie B.
Dorsey ( rec ently rel irecl), AN DP suppo rl s affordab le
roots lo Fortu ne 500, top fli ght consultants and sl rnn g
housing through r ea l estate deve lopm enl , lending and
finan cial support frnm ph ilanth rop ic organizations and
advocacy. ANDP provided long-l r rm reso urces for MIC!
corporations, MIC] has work ed tirelessly lo provide solid
l olaling aboul $800,000 . A dd iti onal funds , includ ing an
facts and fi gures about th e need fo r m ore affo rdabl e
initial ki ck-off of $150,000 from I he Te rw ill iger Fam i ly
housin g in t he A tl anta r egion. O,·er th e past 10 years
found ation in 1998 along w ith pl anning and match ing
the orgw1i zation has prese ntecl its findings to the busi-
gran ts fro m th e Forcl Foundal ion , have he Ipeel sustain
ness comm unity, poli cy makers and th e public al large.
and ad,·ance th e wor k o,·er tim e.
The cl isc ussion th al follows presents so me of th e tools
Sever al acl ditio nal c ircumstan ces co ntr ibute d t o
we use cl to help persuade our audience I hat this issue
I he synergy: A posl -O ly mpic " boun ce " in 1996 ga,·e
needs th eir immecl iale attenl ion.
moment um to our efforts. T he region 's negath·e EPA
sixtee n
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Federal Reserve Bank of St. Louis
VOLUME
17,
NUMBER
1
clesignation brought attention to the neecl for change.
to pC'ople " ·ho trust c• d and liked them . ai1d this CTeatC'd
In adclitio n, otlwr ho using ad,·ocatcs ancl nonp rofits
insta nt credibilit y. By 200!5, the MIC' ! co mmittee had
wrre work in g on the issue of afTordab i(' hous ing, suc h
taken ov11wrshi p of the work ,m cl ANDP became mainly
as conrnn1nit y development corporal ions (C DC's ) and
a f'aci li tatm or th e M IC' I process.
t he Atla nt a Com munit y F'oocl Bank, which for more
th an 10 yea rs has hosted a monthly fornm on housi ng
affordabi lity. Stro ng, charismatic, ,isionary leadership
Making the case: securing the facts
In 2003 af'lcr sen•ral yeai-s of cliseussing, f'act -fincling ,
in side- ancl outs id e of ANDP, supportc•cl by in terna l
commi ttee building and de\'C'ioping case stu dic•s, mem-
and c-xtcrna l funcls , helped fostC'l' a col laborati,·e
bers o f the '.\ II C'I committee decided that it \\·as ess<'ntial
process. T hese fo undational underp inn ings lent added
to make a "business case" for affonlable housing in metro
credibility to the housing afford ab ilit y mo,·e mcnt and
Atl ant a. A ll hough ac h-ocates in tlw reg ion had clo1w a
al lowed f'or stro ng bu y- in by partne rs, ,·o lunt <'NS
great j ob fo r O\'er a decade ra ising awareness about
and consu I t an ts.
the need for affordable housing in our region, a gap pnsistecl between tlw ach·ocate's message ancl th<' aucliPnce
Recruiting and keeping stakeholders at the
table: building an atmosphere of safe space
Recognizing that th e une,·en gro1-1·tl1 of Atla nta pro-
that could influenC'(' major chm1ge.
Th e i\IJC I staff was directed to help cl ose this gap. The
first ii <'Ill on th e- ag<' 1Hla ,n1s lo obtain so lid c•mp irical
foundl y affects the qualit y of life fo r all of tlw r<'gion's
clat a to suppo rt t lw n('C'd for adclit ional affordab le hc)US-
rC'sidents, ANDP ('Stablislwd MJCI in l 9D8 to focus atten-
ing in mu· region as wel l as analysis of' t lw barri ers that
tion on and promote dialogue abo ut I hP CO !llH'C'I ions
pre,-entcd th e regio n from acl1 ie\ing its housing goals.
lw lwec•1 1 affordab le hous ing and qua lit y-o f-life issues.
It was c lear from the ,·cry beginning that to mm ·c' llw
agenda forward , it would be nc•c-cssary to eorn·c•ne key
THE FIRST ITEM ON THE AGENDA
ec-onorniC' and pol itical stakeholders, as we ll as other
ac h·ocac·y groups, around the table to make sun ' tha t
WAS TO OBTAIN SOLID EMPIRICAL
mix ed-inC'ome housing became a basic compon<'nl of'
DATA TO SUPPORT THE NEED FOR
regiona l p lanning.
By Fci>rnaiy o f' 2007, the net work of indi,·iduals who
compri sC' cl lhe M IC' ! Comm itt ee had gro wn from about
.'j
ADDITIONAL AFFORDABLE HOUSING
peopl<' in 1908 to about 70, reprC'senti ng ncai·ly as many
organizal ions. T he goal of the MIC ! committee was not
IN OUR REGION.
to get c-,·rryonc• to agree about <',·e1y cl<'c ision , but to
encourage• pcopk wit h cliffer ent po int s of vic•w to discuss tlw issues and come up ,Yith so lutions to I)(' con-
i\ll CI l'ngagl'd som(' or the bC'st researche1-s in the country,
sicl crccl by a wid<'r audience. It was lai1 tamounl to MIC'I's
i ncl ud ing the Cen tC'r for Ne ighborhood Tec hn o logy
success to make sure that major employers, planners,
(CN T ) in Chi cago; (;C'orgia Institute o f TP c hn ology's
develope rs, env ironm ental groups and o the rs under-
Plann ing and C IS lkpartments; Policy Link in Oa klaml ,
stood how affordab le housi ng affeeted th eir concerns so
Ca. ai1d \few York C'iiy; and the Center for Quality Growt h
th ey coulcl take• th e message to their constituencies and
and Hegio nal DC've lopm ent (CQGRD). Th ese' orga ni za-
make tlwir own ,u-gurnents.
tions ai1cl ot lwrs were instrumental in prO\icling com·inc-
Throughout the process, 11('1 comm ittee nwmbe rs
became our amb,Lssadors ,mcl spokespersons by present -
ing data abo ut th e lack of afTorclablC' housing and it s
impact on ot hrr quality-of-life indicators.
ing reliab le data lo suppo rt their positi ons on the neecl
In mi d-200cJ , MIC' l released a landmark study, "Making
f'or mi xC'cl-inconw and afTorcl ablC' housin g. They spok<'
tlw Case for i\1ixecl lnconw ,mcl i\fixed t ·se Comm uni tic•s,"
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seventeen
whic h not only described th e prob le m but also offered
Communicating key messages
workab le solu ti o ns. The do cume nt became a fo cal
Comm unicating key messages effectively to targeted
point for affo rdabl e hou s ing advocacy, not o nly fo r
a udie nces calls for a fundam ental position statement
ANDP but for many other organizatio ns as well . (Vis it
that provides a framework to keep the communications
www.andpi.org/mi ci to read the study or down load the
plan foc used on the core issue. This statement includes
executive summary.)
a primary message that defmes commw1ity impact, s upporting messages th at s how results, a nd c ustom ized
Meeting people where they are
(instead of where we want them to be)
Figuring out how to move different audiences toward
messaging for diffe re nt a ud iences.
For MIC!, the b usi ness case for mixed- income and
mi xed- use hous ing was central a nd consisted of three
acti on means learn ing how to "meet people where they
broad categories that refl ected the interests of the MICI
are ve rs us where we think they should be." For example,
conunittee members: data, policy and communications.
ANDP has been working with homeb ui lders for years
to help foster an understand ing of the critical need for
more affordable housing in the regio n. In MICI's public
AFFORDABLE HOUSING ISSUES
policy work, the conmt.ittee reconm1e nded pushing for
mandatory inclus ionary zoning, which requires developers
ARE CLOSELY CONNECTED TO OTHER
to incl ude affordable housing in projects above a certain
size, as a way to get more affordable housing buil t. Devel-
CONCERNS SUCH AS TRANSPOR-
opers often object t.o this strategy. However, thro ugh conversations we fo und that their opposition was not really
TATION, HEALTH, QUALITY OF LIFE
an opposition to providing affordable housing; in fact
many builders wa.n ted to be a ble to meet housing needs.
AND ECONOMIC DEVELOPMENT.
Wha t they really obj ected to was governmental regu lations and unfunded mandates that see med intrusi,·e.
In a n effort to "meet the homeb ui lde rs w he re th ey
A structure was estab lished around these th ree categor-
a.re, " MICI agree d to help t he ho me bu ilde rs reduce
ies and ultimately research was carried out to address
regula tory barrie rs that thwart bui lding a di ve rs ity of
these areas of interest. Delive1y of these messages was
housing types. Fro m the bui lders' perspective, regula-
based o n a pl a n c rafted by MICl's communi catio ns
tions at the mll.llicipal level inhibit their ability to produce
s ubcom mittee , whic h includ ed professional pub lic
affordable housing through exclusionary zoning prac-
relations a.nd conm1u.nications in put fro m Porter Novelli
tices. Requireme nts for large minimu m lot sizes, la rge
of Atlanta and PolicyLi nk of New York City. Messages
minim um house sizes, man dated exterior finis hes and
were condensed, crafted and repackaged for the Case
excessive parking requirements force construction cost
Executive Summary by a professional writ er, David
up , which in turn raises the fin al sales price or rental
Goldberg of Smart Growth Am eri ca.
rate fo r apartments. Here is the conm1on grow1el that we
found: by helping to eliminate exclusionary zoning prac-
Connecting the dots: land use, economics,
tices, we could help to open up housi ng markets for the
transportation, housing and health
builders. MICI also works to ens ure th at inclusio nary
The ne>,.'i, step in MICI's housing work is to make one
zoning ordinances feature incentives to make it more
of its underlying principles e:>..1)lic-it: nam ely, that afford-
profitable for builders and developers to include below-
ab le ho us in g issues a re close ly connected to othe r
market-rate units. An example of an incentive co uld be
concerns s uch as transportatio n, health, quality of li fe
a density bonus to allow more units on a parcel than
a nd econo mic developme nt. The most recent version
might other wise be permitted.
of MICI's "Making the Case" cloCLm1ent, available from
e ig hteen
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VOLUME
1 7 , NUMBER
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A.\"DP in April :2007. adclresses the connC'cti on bC't,1·C'C'n
S:\IARTRAQ. CQ(;H D. Southface Energy Instit ut e, till'
housing and hPalt hy C'm·ironmen ts as an N·o,rnm i c
Georgia ConSl'IYancy through their BluePrints procC'ss.
cJ p,·pJop nH'nl , businC'ss case.
and th e I leall h Policy Institut e at the .Joint C011t cr for
I IC'alt h issuC's arC' a perfect clemonst rat ion of I hP con-
Political & I,:c-onomic Studies in Washington, D.C'. , are all
nect ions that link Janel use, econom ics, transportati on,
supportin g similar cases. ANDP/1\ll C I is pur::;uing its
housing and a lac k of social equity. Land usl' planning
goals \\'ilh the support of a ll of these olher enlilies
cases in whi ch lo11·er income housing is loni tPd in the
,,·hich hm·c worked wilh .\IICI and helped us lo operale
least allractin' areas of cities ar e al l too common . Some
from that place of a shared ,ision.
of thPSP locations may seem innocuous hut really pro,·e
Conclusion
to bC' quit P prohlPmati c.
F'or C'x amplP, localing afforclab!C' housi ng npar highway inl t' rchan gl's can have health impl ica ti ons. l{ecC'nt
M I C! mo\'ecl its agenda through five key nw lh ods:
bu il ding a good fimu1cfal base, maki ng th e cas<', 111<'C'ling
st udi <'S have show n I hat children w it h ast hnrn and I he
peop le whC'l'e tlwy ,Lil', comm un icating kPy nwssag<'s and
C'ldC'rl y arp l'spc•ciall y susceptible lo parti culale matl C'r
conn ecling lh<' dol s. Leading an agenda , wlwlher large
th at C'x ists in tllC' air in ex trem ely hi gh c-onc-c•nlrati ons
or small, requires an understanding oft hese nH'lhods.
near interstates and on/ off ramps. This is an issue o f
It is also impo11,mI to coI1\'0y ho,,· one concern ulti-
social equity, hut th e implications for busi11Pss de,·elop-
mately affPc ts others and that prob lem s can not lw
ment help to make th e connection from higlrn·ay lksign
soh·ecl as s0p,u-al e issues but rather require a collPc-ti,·e
to city/regional planning. to business and to publi c- policy.
effort. In th e ;\JIC I case st udy, ana lys is of land use .
This method o f Janel use planning, whi ch may seem
economics, Iranspo1i al ion, housing and health wNe all
cosl-efTec li\'P on lhe surface, can ac tu ally cost co n-
shaped by conn' rns about the lack of socia l equit y.
stituents more. For example , c ity re sidents may face
IICJ's role has been to help foster this understanding
higlwr taxl' S for publi c health ca re seryi(•(•s lwc-ause
of connections and demonstral e those linkag<'s to tlw
of inc-rpased eml' rgency room ,·isits, as !o,1·(' r income
community at large. ♦
resiclen ls who ca nn ot affo rd the hi gh cos t o f IH'alth
insurance l end l o use the em erge ncy roo m as t heir
primary nwans of health car e. From a more• long-le rm
perspec t i\'l' , affo rd abl e housing so lul ions I hal igno re
This anicl(• \\"as "riitPn h~ :\I. ,·on \"kosi. prPsidPnI and Cl-.:<)
\\·ith Thl' :\1\1) CollahoraIi,·l'. Inc. in ALlanLa. :\Ir. \"kosi is an
ar chit ect ;md rr I11rnpd JO prirnll' practicC' in Fl'bntat)' ~00, afll' r
leadin g tlw ~li xPcl i ncon1 P Co mmuniti es Ini tial in' ( ~IICI ) at
AN DP sinn' I !Hl8.
healt hcare issups can cost a municipalily jobs. C'ompaniPs
won 't wanl to locate people in cities cl eemPd unlwalt hy.
Those' co nn'rnc'd about publi c heal I h can IPam from
t lw st ral egies I hal ha,·e helped the "gn'l' n !Jui I ding"
m on•nH' nt , whic h is sta rtin g to c;1 l c- h on lwc-ausc'
aclnwa les han' been p resenting lhc issue' from an
econo mi c-, business point of , ·ie,,·. Em·irornn enla l
organizalions hm·e und erstood this slrategy of making
a business case for ecologically sound dC'c-isions. GreC'n
building, once' seen as a fringe issue, is now c•nl Pring
mains! ream corporate culttu-e.
To mon' ,m agenda effectiwly, it's impo1i ,mt to help
peop!C' look lwyond their o,1T1 professiona l l'x1wrtise
or life ex pl' ri l'nCl' S to a bigger picture- a piclur<' that
enahit's I hpm to SC'(' ,,·ays to make tlH'ir job and Ji,·es
easier. Organizat ions and researc h think tanks like
FEDERAL
RESERVE
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
BANK
OF
ATLANTA
ninet ee n
SPOTLIGHT ON THE DISTRICT
FLORIDA
CREDIT UNIONS OPEN DOORS TO HOMEOWNERSHIP
An im1ovative organization in Florida's Tampa Bay area
Developing affordable housing
is providing home ownership opportunities for low- and
In addition to wor king with pot ential
moderate-income ramilies. Th e Credit L" ni on Housing
homeb uye r s, CL" I-IP al so arran ges com-
Partners LLC has created a unique co!Jaborati,·e to b1ing
mercial residential de\'elopment loans tlu·ough tlie
Florida-based credit uni ons t ogether with developers,
preferred lenders for creation of affordable housing. Th e
com munity organizations and governm ent agencies to
organizat ion has collaborated wi th private, government
support affordab le housing initiatives.
and fai th-ba5ed partners to support several developments:
In 2003, two Tampa credit unions, GTE Federal Cr edit
InTown Homes is an affo rd able, world"orce housing
Union and Suncoast Schools Federal CredH Un.ion, j oined
de, ·elop ment located in histori c West Tampa. Seventy
forces to create a li mited liability compar1y, Credit L'nion
houses ar·e slated for constructi on through this partner-
Housing Paiiners (CUI-IP) . Th e National Credit C nion
ship ar11ong for-pro fit de,·elopers, CUHP arid the City of
Fmmdation awar·ded a three-year· matching grar1t to the
Tar11pa. \Vest Tar11pa Conununit y Development CoqJora-
organization in 2004 to provide homeown ersh ip oppor-
tion and North Howard District will also j oin with CUI-IP
tunities for first-tim e homebuyers. Two additional pait-
l o deve lop housing in West Tampa.
ner credit unions, MacDill Federal Cr edit Union and
A USDA Self-Help housing development, Fl01ida Home
Tampa Bay Federal Credit Cni on, ha,·e now come on
Partnership of Ruskin , will receive add iti onal fundin g
board as well.
from Ilillsborough Co w1ty, and CCI-IP wi ll pro,·ide some
of the linar1cing for homebuyers. To qualify, prospective
Partnership provides loans and counseling services
The goal of CUIIP is to mat ch those wh o want to buy
homes with member credit unions offerin g competitive
homebuyers m ust eai·n 80 percent or less of the cmmty
median income. The development will include 205 homes.
Plai1 t City Comm unity Deve lopment Corpora tion , a
mortgage products. To reac h this goal , CllIIP pro,·ides
partn ership with a commu nity-based nonprofit, is
poten ti al homeowners with one-on-one sen ices such as:
designed to revital ize an unclerservecl rlu·al conrn1w1.ity.
• membership with the appropriate credi t union
partner, based on eligibi lity requirements;
• fi nancial cou nseling and group fimui cial education
classes in basic budgeting, cred it report analysis and
household fin ancial planni ng to assist w ith homeown ership and wealth building;
• homeownership advisory se1vices including personal
cw Covenant Fait h Jniti ati,·es Community Development lnc. , located in Ocala, is a faith-based conummity
orgar1izati on working Vlrith CUII P to rebuild economically
challenged neighborh oods Vlrith new homes.
Now completing its third year· of operation, CLrIP provi des a model of best practices for other credit unions
and fina ncial institu ti ons. By creating an organization
fmar1cial ai1alysis, mortgage readiness analysis and
staffed by housing professionals, this partnership enables
advice about th e homeown ership process from pre-
Florida creel.it unions to participate in afford able mort-
purchase to post-p w-chase;
gage lending. Such collaborati ons also suppmt conrn1u-
• ref erral to vari ous city and county programs th at
assist with clown paym ents, prmide homeowner-
nities by prmricling adclitional resow-ces for affordable,
workforce housing de,·elopment.
♦
ship educati on classes and inform cli ents about
affo rdabl e new home deve lopments.
twenty
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Th.is a.ti ic-le was writ lr n by .Janet I larnrr, regional community
de,·clopmrnt managrr in the Atlant a Fed's Jacksonville branch.
VOLUME
17,
NUMBER
1
Through the eyes of three teenagers, midd le and hi gh sc hoo l stude nts wil l learn abo ut some of the most
important aspects of fin ancial re spons ibi lity suc h as budgeting, banking, sav in gs, and wise use of cre dit.
The Federal Reserve Bank of Atlanta 's new, easy-to -use program, Katrina 's Classroom: Financial Lessons
from a Hurricane, teac hes stude nts the imp orta nc e of be ing financially prepared .
Katrina's Classroom is a four-chapter, DVD-based curriculu m with lesson pla ns and stud ent activiti es tied to
each fi ve-mi nute video segment. Developed by professional curriculum writers , each lesson plan expa nd s
and reinforces concepts aligned to nationa l conte nt stan dards in pe rsonal finan ce.
Orde r your free copy of Katrina's Classroom today to provide an empowering and
interacti ve curriculum for stude nts. To learn more abo ut Katrina's Classroom, visit
frbatlanta.org to fi nd a workshop conducted by a Fed eral Reserve branch near you .
YOUR FREE KATRINA'S CLASSROOM
CURRICULUM PACKAGE INCLUDING DVD
AND LESSON PLAN AVAILABLE TODAY AT
WWW.FRBATLANTA.ORG/ ATLANTAFED/
KATRINA.CFM.
• ~ • FEDERAL
~ RESERVE
'ffi:F_ BANK
~ . a/ATLANTA
FEDERAL
RESERVE
BANK
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
OF ATLANTA
FEDERAL R E SE R VE BA N K D F ATLANTA
COMM U NIT Y AFFA I RS
DE P ARTMENT
1 000 PEACHTREE S T REET , N . E .
ATLANTA , G E ORGIA 30309 - 4 47 0
CH ANG E SE RVI CE RE QU ESTED
STAFF
VICE PRESIDENT
Steve Foley
COMMUNITY AFFAIRS OFFICER
Juan C. Sanchez
COMMUNITY AFFAIRS DIRECTOR
Waync Smith
EDITOR
Jcnnifcr Gri er
PRODUCTION MANAGER
1larri ctte Grissom
STAFF WRITERS
Jessica Le\leen Farr
Janel ll amcr
ancy i\ l ontoya
Waync Smith
CONTRIBUTING WRITER
M. von Nkosi
DESIGNERS
Peter I lamilton
Odic Swanegan
Free subscriptio n and additional
cop ies are available upon reque l
by mail at the Community AJfairs
Depaitmcnt address above, or
e-mail u at Part11 ers0 a l l.ji·b. org ,
or cal l 404/498-7287; FA,'(
404/498-734:2. The \~ ews
expre sec! are not necessari ly
those of the Federal Resen ·e
Bank of Atl anta or th e Federal
Rese1ve System. l aterial may be
rcprintecl or abstracted provi ded
that Partn ers is credited and
pro\·ided with a copy o f the
pub lication.
www.frbatlanta.org
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
PRESORTED
STAN DARD
U.S. POSTAG E
PAI D
Atl anta , GA
Perm it No . 292
@FedFRASER